2022 (7) TMI 297 - DSC - GST

Accused granted regular bail in GST fraud case with condition to deposit 10% of tax liability

Hetram s/o Atmaram Sharma, Versus DGGI, Gurugram (Director General GST Intelligence.

District Court Gurugram granted regular bail to accused in GST fraud case involving fraudulent input tax credit availment. Court noted accused was in ... Seeking grant of Regular Bail - fraudulent availment of input tax credit (ITC) - existence of the firm or not - section 132(1)(b) & (c) of GST Act, 2017 - HELD THAT:- In the peculiar facts and circumstances of the case, existence and non-existence of the supplier firms of M/s Rajnandini is yet to be determined and so is the tax liability of the applicant. In this case the applicant-accused is in custody since 19.5.2022. His custodial interrogation is no more required. Therefore, keeping in view the totality of facts and circumstances of the case and without commenting anything on merit, the bail application is allowed. This bail order is subject to the condition that the applicant shall deposit 10% of the total liability i.e. 7.2 Crore within 10 working days from today with the concerned competent authority and other conditions imposed - application allowed. Issues Involved:1. False implication of the applicant-accused in fraudulent Input Tax Credit (ITC) availing.2. Existence and operational status of supplier firms.3. Applicant's cooperation and risk of influencing witnesses or tampering evidence.4. Legal precedents and conditions for granting bail.5. Socio-economic nature of the offense and its implications.Issue-wise Detailed Analysis:1. False Implication of the Applicant-Accused in Fraudulent ITC Availing:The applicant, Director of M/s Rajnandini Metal Ltd., was accused of fraudulently availing ITC worth Rs. 77 Crore. The defense argued that the company had paid the full value of goods along with GST through proper banking channels and maintained proper records, including photographs and toll receipts of goods received. It was emphasized that the applicant's company had been falsely implicated as there was no evidence to suggest that the company did not receive the goods or that it was a beneficiary of the alleged offense.2. Existence and Operational Status of Supplier Firms:The defense highlighted that the State GST Department had found the supplier firms M/s Curil Tradex Pvt. Ltd., M/s Vivrak Impex Pvt. Ltd., and V.R. Trading operational during searches conducted in November 2021. For M/s Shri Ram Trading, the defense pointed out that there was no record indicating when it became non-existent. The prosecution, however, argued that these firms were non-existent and had issued fake invoices without actual supply of goods, leading to fraudulent ITC claims by M/s Rajnandini.3. Applicant's Cooperation and Risk of Influencing Witnesses or Tampering Evidence:The defense argued that the applicant had fully cooperated with the investigation, had not attempted to influence any witnesses or tamper with evidence, and was not a flight risk. The prosecution did not provide substantial evidence to counter these claims.4. Legal Precedents and Conditions for Granting Bail:The defense cited several legal precedents where bail was granted in similar cases involving alleged fraudulent ITC claims. Notably, the Supreme Court in C. Pradeep Vs. Commissioner of GST and Central Excise, Selam, and other High Court judgments were referenced to argue that the accused should be granted bail, especially when the maximum punishment was only five years and there were no stringent conditions for bail under the GST Act, unlike the PMLA Act, 2002, and Companies Act, 2013.5. Socio-Economic Nature of the Offense and Its Implications:The prosecution emphasized that socio-economic offenses, like the one in question, should be approached differently due to their impact on the economy. They referred to various judgments to support their stance that such offenses warranted stricter scrutiny and handling.Judgment Analysis:The court acknowledged that the premises of the supplier firms were found operational during the State GST Department's visits. It noted that the applicant had paid the tax on the entire value of goods purchased and that there was no mismatch in stock or sold goods during the department's visit. The court agreed that if the supplier firms ceased operations later, the applicant could not be held liable. The court also considered the applicant's cooperation, lack of flight risk, and the absence of stringent bail conditions under the GST Act.The court referred to several precedents where bail was granted in similar cases, emphasizing that arrest should be a last resort and personal liberty should be curtailed only when imperative. The court concluded that the applicant's custodial interrogation was no longer required and granted bail, subject to the condition that the applicant deposits 10% of the total liability (Rs. 7.2 Crore) within 10 working days and complies with other conditions, including not leaving the country without permission and not influencing witnesses or tampering with evidence.Conclusion:The court granted bail to the applicant, highlighting the operational status of the supplier firms during the relevant period, the applicant's cooperation, and the absence of stringent bail conditions under the GST Act. The decision was influenced by legal precedents emphasizing the importance of personal liberty and the need for arrest to be a last resort.